Do’s
Find out a bit about the team behind a crypto project you want to invest in. In new, unregulated markets, the potential for scams and Ponzi schemes is high, so be smart about not just what you’re investing in, but who you’re investing in.
Go against the grain; be fearful when others are greedy and greedy when others are fearful. It can be hard to stay disciplined in executing this strategy but if you stick to it, it will pay dividends.
Understand your risk tolerance and time horizon. A classic example is the rule of 100. Take 100, subtract your age, and that’s how much money you should have at risk in the market. However, crypto being such a volatile asset you may want to keep it as an even smaller portion of your overall portfolio and also understand the time horizon for the money you have invested. For example, if you’re investing money that you may need within 6 months you could get screwed if the market takes a hit in the short term and you’re forced to liquidate at a loss because you need to use the money.
Identify projects you like in advance, and position yourself for a dip upon which you buy buy buy. Sometimes it can be a good strategy to look for investments you like, even if they are way up, and then find a target price that you would be comfortable buying that asset at, and then if it takes a hit you already know exactly what to do.
In a growth-driven market with little to no fundamentals, look for indicators of future growth such as the project’s marketing, the uniqueness of their value proposition, differentiating use cases, etc… for example, Polkadot, which is one of the only parachain networks.
Don’ts
Don’t ever invest in anything w/o at least a basic understanding of it. If you don’t understand something you have no clue of its nuances, its pros, and cons, or the competition (all of which could factor into its value and growth), a lack of understanding is a path to unexpectedly getting screwed. Remember that knowledge is power.
Don’t buy into hype hoping to make a quick buck. Hype and FOMO are the two most dangerous things to buy into, the examples of this are abundant, dogecoin, Gamestop, AMC, Shibu Inu, if you enjoy gambling then by all means go for it, but remember that momentum can swing downwards as fast or faster than it swings upwards.
Don’t flatter yourself thinking you’re special because you made money in a bull market. We see it all too often, people with no background or expertise who got lucky and made a bit of money and now self identify as an expert, or got in early in a bull run and are up 50 or 100 percent and now think they’re a qualified financial advisor, give yourself 10 years of consistent solid returns and accurate predictions, so you don’t say something stupid and make a fool of yourself.
Don’t put all of your eggs in one basket, as hard as it can be to stay diversified in a market like this is. if you are familiar with the dot-com boom of the late 90s early 2000s, the number of different internet companies going public was insane, and frankly, most people didn’t know which companies were going to stick around and which were going to zero. A perfect example of a company that failed to pivot is Sears, in 2000 the retail giant may have looked like a great stock to own, but they failed to put any focus on e-commerce and subsequently lost a lot of market share to companies like Amazon and Walmart.